Nigeria Eurobonds Yield Rises Amidst Rates Decisions
Nigeria’s US dollar bond yield rose to 10.36% in the international market as foreign portfolio investors and asset managers scaled down holdings in reaction to rate decisions in the United States and the United Kingdom.
The Eurobond yield increased as the market downplayed Nigeria’s recent settlement of 2020 COVID-19 $3.4 billion funding support from the International Monetary Fund (IMF). According to some analysts, trading activities reflect the general mood across African bonds ahead of inflation, with mixed expectations about interest rate direction amidst unsettled macro uncertainties.
In its note, Cowry Asset Limited said investor selloffs had a significant impact on Nigeria’s sovereign Eurobond market, fueling bearish sentiment and pushing yields higher across the curve. The investment firm told investors in a note that the bearish sentiment on Nigerian Eurobonds led to a slight increase in the average yield, which climbed to 10.36%.
A UK bank holiday initially muted activity, while upbeat U.S. services data eased recession fears but hinted at inflation risks. As the week progressed, firmer crude oil prices and bargain hunting lifted African Eurobonds, with investors anticipating the Fed’s rate decision.
In line with market expectations, the Federal Open Market Committee (FOMC), at its May 2025 meeting, voted to maintain the target range for the federal funds rate at 4.25% – 4.50%, leaving the rate unchanged for the fourth consecutive time.
The committee noted that, excluding the contraction in net exports in Q1-25, economic activity continues to expand at a solid pace, while labour market conditions remain robust and the unemployment rate stable.
However, the FOMC acknowledged that uncertainty regarding the economic outlook has intensified, with risks now tilted toward both higher unemployment and persistently elevated inflation. Inflation remains above the 2.0% target, prompting a more cautious approach.
The committee reaffirmed its commitment to the dual mandate of maximum employment and price stability while emphasizing a data-driven approach to future policy decisions. “Given the underlying tone of the committee, coupled with the resilient labour market and lingering inflationary pressures, we expect the FOMC to keep rates unchanged in the near term”, Cordros Capital Limited said.
Analysts highlighted that this will allow time to assess the economy’s performance and trajectory more thoroughly, particularly as it evaluates the broader implications of the tariff policies and lingering global uncertainties.
Indeed, the CME FedWatch tool indicates an 82.9% chance that the Fed will hold the key interest rate at the June policy meeting. Meanwhile, the Monetary Policy Committee (MPC) of the Bank of England (BoE) voted by a majority of 5 – 4 to reduce the bank rate by 25 bps to 4.25% at its May 2025 meeting.
The decision reflects rising concern over weakening economic momentum, with the BoE citing slower global growth and the anticipated drag from new import tariffs as key downside risks. Although GDP remains relatively resilient and wage growth continues to moderate, the MPC is still divided in its inflation outlook.
Two members voted to keep rates unchanged, preferring to wait for clearer evidence on services inflation and underlying price pressures.
In contrast, the two members who supported a larger 50 bps cut and the four who voted for a 25bps reduction shared the view that keeping monetary policy tight for too long could unnecessarily constrain economic activity, particularly given signs of a softening labour market and slowing wage growth.
The BoE reaffirmed that it is not committed to a fixed path of rate cuts, stating that future decisions will remain data dependent. “In our view, the bank rate will likely stay restrictive, given the BoE’s cautious tone regarding existing downside inflationary risks from global developments.
“Accordingly, we expect the BoE to hold the rate at the June meeting, with another potential cut in H2-2025, depending on global developments and the magnitude of improvements in economic data”, Cordros Capital Limited stated. #Nigeria Eurobonds Yield Rises Amidst Rates Decisions Nigerian Exchange Index Hits All-time High in Explosive Rally
